Verisk: Labor Costs Drive 4% Total Reconstruction Cost Increase

• By: Olivia Overman
• August 20, 2026

Total reconstruction costs, including materials and retail labor, increased 4% from July 2025 to July 2026, according to the Verisk third quarter report, “360Value Quarterly Reconstruction Cost Analysis.” This marks a slight deceleration from 4.2% from July 2024 to July 2025. In the second quarter of 2026, costs increased 1.2%.

For residential reconstruction, total costs increased by 3.8% from July 2025 to July 2026 and 1.2% from April 2026 to July 2026. Residential reconstruction costs increased year over year in all states, with Kansas experiencing the largest increase of 5.3%, followed by Michigan and Oklahoma at 5.1%.  

Certain states saw significantly lower cost increases, with Utah seeing the largest drop in cost rankings, falling 18 places with a 2.8% increase. South Dakota fell 16 spots with a 3.5% increase and New York dropped from 31st to 44th with a 2.9% increase.

Meanwhile, total commercial reconstruction costs increased 4.1% from July 2025 to July 2026 and 1% from April 2026 to July 2026. Rhode Island once again saw the largest increase of 6.8%. Oklahoma and Iowa also repeated their second- and third-place rankings from the second quarter of 2026 with increases of 6.5% and 5.7%, respectively, the report said.

While material costs remained largely stable, labor costs continued to be the primary driver of reconstruction cost inflation. The report found that combined labor rates climbed 4.7% year over year, more than double the rate of material cost increases. Continued wage growth across major trades reflected ongoing skilled labor shortages, capacity limitations and a demand for specialized construction services.

Labor rates increased across all eight tracked trades in the second quarter. All trades saw rate increases, but concrete mason labor costs led with a 4.2% increase, with heating and AC mechanic rates up 1.3% and roofer rates up 1.2%.

On an annual basis, concrete mason labor costs surged 17.4% year over year, highlighting persistent workforce shortages in key construction trades.

Meanwhile, material prices remained largely stable, with an annual increase of just 2.1% and modest second-quarter price increases across all eight tracked composites. Concrete composite saw the largest increase of 0.9%, followed by roofing composite at 0.4% and paint composite at 0.1%. Lumber posted the only decline of 0.04%, while carpet and metal roofing were unchanged.

Olivia Overman is IA content editor.